The standardized, combined exposure of the MBX index will provide a more accurate pricing point for the entire passthrough structure. It also reduces the independent amounts required for the same type of exposure through an IOS/PO combination, a spokesperson at Markit said.

The MBX series of indices will reference the same agency pools as the existing IOS & PO indices. The introduction of new series/sub-indices of MBX might either precede or follow the introduction of IOS/PO indices corresponding to the same underlying reference pools.

The deal structure will mirror the total return swap model from the IOS & PO indices, and will have both interest payment and principal payment components payable by the short position.

The Index will have six initial sub indices, one for each of the corresponding IOS & PO coupons: MBX.FN30.400.09; MBX.FN30.450.09; MBX.FN30.500.09; MBX.FN30.550.08; MBX.FN30.600.08; MBX.FN30.650.67.

It will also have exposure to agency pool coupon cashflows via synthetic TRS contracts.

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